The Strauss Blog

Are You in a Conflict of Interest?

How would you know if you are in a conflict of interest?

What determines if you are in a conflict of interest? 

Does it matter if it is a direct and obvious conflict of interest or simply the perception of a conflict of interest?

When should you or are you required to disclose the conflict?

Does the conflict disqualify you from participating in the conversation related to the matter or any other board activities?

These are only some of the many questions that need to be answered when considering if you are in a conflict of interest situation.

Your Board Comes First

The bottom line for any not for profit organization is that directors have a duty of loyalty to the association. This means that a board member cannot use his/her position as a director for personal, family or professional gain.

It is important that your board always be aware when a conflict could exist and how to deal with the conflict when it arises to ensure the board is working for the best result for the organization and equally as important, being seen to be doing so.

Most of our clients have developed a conflict of interest policy statement that outlines the process board members follow when a conflict might exist. Some of the items included in the policy are:

1. No board member (or family member) should enter into a business relationship with the association (there are some exceptions where it looks at competitive sealed bids or declaring the conflict and not voting on the decision).

2. Board members must declare/disclose a conflict of interest before discussion takes place and excuse themselves from the meeting while the item is being discussed (any matter where a board members ability to act in the best interest of the association may be or appear to be compromised by a personal or professional outside interest).

3. Board members should not accept gifts, entertainment or other favours with a set dollar value (whatever the board determines is reasonable) to avoid the appearance of a conflict of interest.

Minutes must record all declarations of conflict of interest.

Address The Policy Annually

As an association management company we recommend to each board we manage that an annual statement concerning possible conflicts of interest be signed at the beginning of each calendar board year as well as at th beginning of a board appointment.

The statement acknowledges that the association conflict of interest policy statement has been reviewed and that at the time of signing board members would declare if they were aware of any conflicts of interest. This is a good practice to get into as it allows board members to think about potential conflicts and be aware that it is important to disclose and declare to protect themselves and the association where they volunteer.

If you are a volunteer on a board and you do not have a printed policy in place for how your association deals with conflict of interest, then I urge you to get to work researching and putting one in place.

Resources for Developing Your Policy

As an association management company we have referenced a nonprofit policy sampler book put out by BoardSource. The book is The Nonprofit Policy Sampler, Second Edition written by Barbara Lawrence and Outi Flynn. This has great sample documents for conflict of interest statements for all aspects of nonprofit associations.

Another source that I located detailed what a conflict of interest might be and how to address it : http://www.educaloi.qc.ca/en/capsules/incorporated-non-profit-organizations-conflicts-interest-directors I found this site to be helpful as it provides questions and answers that put what can be a complicated topic and makes it easier to understand.

Always err on the side of declaring a conflict, or potential conflict, if you think there could be one. It will make the job of the board and it’s volunteers much easier as well as protect the integrity of the organization.